Wednesday, October 07, 2015

As most readers of this space know, on September 28, Sprint
released this statement: “After thorough analysis…it will not participate
in the 600 MHz incentive auction.” The statement went on to say: “ Sprint has
concluded that its rich spectrum
holdings are sufficient to provide
its current and future customers great
network coverage and be able to provide the consistent reliability, capacity,
and speed that its customers demand.”

As my mother used to say: “Now you tell me!”

I say this because, again, as most readers know, Sprint
spent much time and money lobbying furiously to establish, maintain, and, if
possible, expand the reserve spectrum the FCC set-aside to provide Sprint,
T-Mobile, and others favored bidding treatment in the 600 MHz auction. If you
peruse the relevant dockets (AU Docket No. 14-252 and GN Docket No. 12-268),
you will find at least a couple dozen comments and ex partes to this effect. Of course, Sprint is perfectly free to spend
its lobbying resources as it pleases. But, unfortunately, its extraordinary
efforts to preserve and expand the reserve set-aside, although it was not
alone, required others parties – and the Commission’s own staff – to expend
extra resources as well responding to its pleas.

And, after all that, Sprint announces that its rich spectrum holdings are sufficient to provide its current and
future customers great coverage
network coverage.

There are some important lessons here that go way beyond
lamenting the expenditure of time and resources.

The foremost lesson is one I have tried to hammer home for many
years. Absent a true market failure – and there is not one with respect to the
marketplace for broadband services, including wireless services, the Commission
needs to quit trying to manage competition. While FCC Chairman Tom Wheeler and
his colleagues may not accept the characterization, what else, but “managing
competition,” to call the establishment of bidding set-asides designed to favor
certain market participants in an auction?

And this is even more the case when the spectrum set-asides
are intended to favor well-capitalized firms like T-Mobile and Sprint. I have
never argued against foreign ownership of carriers participating in the mobile
marketplace, and I don’t intend to do so now. Generally, the infusion of
foreign capital into the U.S. from major corporations like Deutsche Telekom
(T-Mobile) and Softbank (Sprint) is a net positive. But I see no reason why
such foreign ownership should be favored as a matter of regulatory policy in
the context of a spectrum auction or otherwise.

Here’s another problem, much documented in the “public
choice” literature, with the Commission’s “managing competition” approach. It
encourages even more special pleading in the future because all parties know
the Commission’s door – its mindset, really – is receptive to accepting such
entreaties. For example, in this case, a focal point all along of the special
pleading regarding the 600MHz reserved spectrum has been that Verizon and
AT&T already possess “too much” low-band spectrum relative to their
competitors.

The notion of the Commission trying to assess the precise
differences in the various spectrum bands relative to their marketplace value
is highly dubious. In any event, isn’t it clear, now that the Commission has
established the precedent of jiggering the auction on this basis, that Sprint will
be enticed in the future to once again argue it needs some form of favored treatment
because it lacks sufficient spectrum? This, even though Sprint decided not to
bid on low-band spectrum in a special set-aside in the upcoming auction because
“its rich spectrum holdings are sufficient to provide its current and
future customers great network
coverage.”

The Commission invitation to even more special pleading
would be farcical if it weren’t sad.

Now, I appreciate that constructing and implementing the
forthcoming 600 MHz auction is a very complex undertaking. I recognize that
Chairman Wheeler and his fellow commissioners are working hard to try to ensure
the auction is successful. I especially appreciate the dedication, hard work,
and good faith of Gary Epstein, Howard Symons, Roger Sherman, and others on the
Commission’s staff, as they put in long hours with the aim of conducting a
successful auction.

But this too must be said. Whether through ingrained regulatory
hubris, or through a more conscious determination not to relinquish any
regulatory control, the Commission continues to try to “manage competition” in
far too many instances when it should, instead, simply step away and rely on
market forces.